Fifth Time's a Charm? Puerto Rico Power Utility Taps Another CEO

(Bloomberg) -- Puerto Rico’s bankrupt power utility named yet another chief executive officer, turning this time to an insider with an inexpensive salary after a firestorm over his predecessors’ compensation.

The move capped eight days of upheaval after one CEO resigned, his replacement backed out and five of seven board members quit, citing the interference of "petty political interests."

In an announcement Wednesday in San Juan, Governor Ricardo Rossello said the Puerto Rico Electric Power Authority’s next head would be Jose Ortiz, a former chief executive of the water and sewer utility and one-time chairman of the power company known as Prepa. Ortiz had more recently been working as a consultant.

The most important challenge "is elevating credibility," Ortiz said Wednesday at the governor’s residence. "It’s making people understand that Prepa is going to honor its commitments, and that we have drawn a path forward that is coherent and that benefits the people of Puerto Rico."

Perhaps most significantly, he accepted the job with a $250,000 annual salary, a third of the $750,000 base promised to the last nominee, Rafael Diaz-Granados. Amid the uproar, Diaz-Granados withdrew the day after he was named.

The churn underscores the challenges facing the utility. After years of mismanagement and corruption, the company is a shambles, charging above-mainland rates to provide unreliable service. In addition to bankruptcy, the next CEO will also oversee efforts to sell assets and put the transmission and distribution unit under a private concessionaire.

Puerto Rico is bracing for austerity measures, and residents erupted when they learned this year that Prepa’s top executive wouldn’t be sharing their sacrifice. In March, Walter Higgins -- an executive from Nevada who had a long resume but didn’t speak Spanish -- was named CEO with a $450,000 salary, plus bonus. The legislature blocked the bonus, prompting his resignation last week. Diaz-Granados’s richer base pay seemed to be designed to circumvent that legislation.

Diaz-Granados technically quit before his start date. But even if you exclude him from the CEO turnover, the utility has cycled through four other chief executives just since November. That’s when Ricardo Ramos was pushed out amid criticism of power-restoration efforts after Hurricane Maria, including a $300 million contract the company extended to Whitefish, a little-known two-person company named after its Montana hometown.

Ortiz said $250,000 year is “adequate” and appropriate given Puerto Rico’s situation.

©2018 Bloomberg L.P.

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